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2025-10-27 19:30:57
[Pound Sterling Strikes Back, Bull-Bear Game Intensifies Ahead of Central Bank Decision] ⑴ The British pound ended its three-day losing streak against the euro on Monday and rebounded to 1.3345 against the US dollar after five consecutive days of decline, a single-day gain of 0.20%. ⑵ Market expectations for a Bank of England rate cut have risen sharply, with interest rate futures implying a surge in the probability of a rate cut by the end of the year from less than 50% to 67%, fully pricing in two rate cuts before June 2026. ⑶ UK 2-year government bond yields experienced significant volatility, falling 7.5 basis points last week before rebounding 2 basis points on Thursday and Friday, stabilizing around 3.80% on Monday. ⑷ The euro fell 0.14% against the pound to 87.22 pence, retreating from Friday's high of 87.47 pence since October 6. ⑸ Eurozone Purchasing Managers' Index data reinforced market expectations that the European Central Bank will maintain its 2% deposit rate until 2027, completely ruling out a rate cut in 2026. ⑹ Barclays strategists noted that fiscal events remain the dominant factor for the British pound in the medium term, believing that the threshold for a positive outcome is not high, while also facing significant divisions within the Monetary Policy Committee. ⑺ The market generally expects the UK Chancellor of the Exchequer to raise taxes by tens of billions of pounds in the November 26 budget to maintain fiscal targets and avoid a loss of confidence in the bond market. ⑻ The US dollar saw divergent trends, ending its six-day winning streak against the Japanese yen and its three-day decline against the euro, indicating that major currency pairs are rebalancing ahead of the central bank's decision week.
